TRADE LIBERALISATION AND POVERTY REDUCTION

Relationship between Trade Liberalisation and Poverty Reduction in Pakistan

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Relationship between Trade Liberalisation and Poverty Reduction in Pakistan

Introduction

Globalisation has increased the world trade with the advancement in the field of transport and new travel itineraries. Over the past two decades, there has been a dramatic change in the pace of globalisation and liberalisation. The integration of the nations by means of flows of commercial, cultural integration, financial and technology has improved to extraordinary levels. Currently, it is widely accepted that globalisation is a significant component of economic policy and trade liberalisation is a key step to achieve it. Consequently, there is a greater integration was evident in countries around the world, trade in goods and services are crossing borders, in line with the processes of regionalisation and globalisation. Trade liberalisation is usually refers to an ally in the fight against poverty, but has a tendency to reduce poverty, provide additional resources to address the problem of poverty, and has a crucial effect on income distribution, not works in a systematically way.

Economic theory provided different reasons on how trade liberalisation enhances the economic growth of a country. For example, with a sufficient amount of knowledge and technology, greater allocation efficiency, easier import of capital goods, trade can stimulate economic growth, and lead to the availability of a wider range of use at a lower price. Along with the advent of globalisation, the rewards can be substantial due to openness in global investment and international trade, which provides assistance for the acquisition of technology and inputs that increase efficiency and enhance growth. Accessibility to export more diverse and larger markets to reduce the risk associated with the exclusion of trade and volatility on the markets for specific countries.

Free movement of capital is one of the significant sources of attracting foreign direct investment (FDI), which can encourage inward investment, thus contributing to economic growth and job creation. In order to facilitate the economic opening to increase the breadth and depth of local financial markets, conducting to improve the efficiency of financial markets a better allocation of resources and cost reduction, if the financial markets are well developed.

Several studies have been conducted to determine the impact of globalisation on people's wellbeing. It is important to understand that the effect of trade liberalisation on poverty is vital as the opening of poor people in the developing world. Additionally, it was argued by many researchers that the long-term trade regimes, liberalisation success that may leave open a number of individuals below the poverty line, and that hurts the poor actors of the financial system in the short term.

At the end of 1970s and during the early 1950s, the protectionist trade policies are pursued by Pakistan. The main objective of these policies was to provide protection for the promising industries against imports. The import regime has been characterised by both non-tariff barriers (NTBs) and tariffs. The high rate of tariffs on imported goods like quota restrictions resulted in ...